Ensuring smooth and efficient handling of customer orders is key to business success. That’s where order management comes into play. Whether you’re a retailer, wholesaler, or D2C brand, having a reliable system in place for tracking, fulfilling, and managing orders is essential for customer satisfaction and business growth.
Investing in a robust order management system is no longer optional—it’s essential for scaling your business. Choose software that offers real-time inventory visibility and supports omnichannel operations to future-proof your fulfillment strategy.
What Is Order Management?
Order management refers to the process of receiving, tracking, and fulfilling customer orders across various sales channels. It starts when an order is placed and continues through inventory management, picking, packing, shipping, and even returns or exchanges. The ultimate goal of order management is to deliver the right product, at the right time, to the right customer—efficiently and cost-effectively.
An Order Management System (OMS) is the software solution that automates and streamlines this process, ensuring accuracy, speed, and visibility across the order lifecycle.
Order management involves capturing, tracking, and fulfilling customer orders from the moment they’re received until delivery. An efficient order management system (OMS) helps businesses automate and streamline this process, ensuring accurate order fulfillment.
Order Management Process Stages
- Receiving the order: Orders are captured from various channels, ensuring accurate order details for processing.
- Processing/Fulfilling the order: Inventory is allocated, and the order is picked, packed, and prepared for shipment.
- Post-sales processes: Handling returns, exchanges, and customer support to ensure customer satisfaction.
Key Aspects and Benefits
- Customer satisfaction and loyalty: Timely and accurate deliveries build trust and encourage repeat business.
- Increased efficiency, reduced errors: Automation speeds up order processing and reduces human errors.
- Better inventory management: Real-time inventory tracking prevents overstocking and stockouts.
- Enhanced visibility into order status and inventory: Both businesses and customers have clear visibility of order and inventory status.
- Streamlined order fulfillment: Automated processes ensure faster and more accurate order fulfillment.
- Better data analysis and reporting: OMS provides insights to optimize operations and decision-making.
- Stronger vendor relationships: Improved coordination with suppliers and logistics partners enhances the supply chain.
- Improved financial management: Real-time data helps businesses manage costs and streamline invoicing.
- Scalability and growth support: OMS adapts to handle increasing orders and expanding sales channels.
- Accurate product availability: Real-time updates ensure only in-stock items are available for purchase.
Why is Order Management System (OMS) Important?
A modern Order Management System is critical for businesses aiming to scale operations, reduce errors, and enhance customer experience. It acts as a central hub, connecting various business functions like sales, inventory, and fulfillment for a seamless end-to-end process.
1. Software platform for effective management
Using order management software provides a centralized platform where all order-related data and processes are integrated. This eliminates manual errors, speeds up order processing, and improves communication across departments. Businesses can manage orders across multiple channels—including eCommerce, retail, and wholesale—from one unified system.
2. Provides control and visibility
An effective order management system offers greater control over inventory, delivery timelines, and customer communications. It provides full visibility into order statuses, stock levels, and fulfillment progress. This transparency helps in proactively managing delays or issues, reducing customer complaints and returns.
3. Tracks information and processes
Order management system software keeps track of every detail throughout the order management process—from order creation to final delivery. It ensures that order confirmations, shipping updates, and inventory adjustments happen in real time. This not only improves internal efficiency but also enhances the customer’s post-purchase experience.
4. Includes order entry, inventory, fulfillment, after-sales
A robust software for order management system covers all key stages: order entry, inventory tracking, fulfillment operations, and after-sales services like returns or support. Automating these steps ensures accuracy, reduces labor costs, and shortens the order-to-delivery cycle. After-sales features also boost customer retention and satisfaction.
5. Offers real-time insights for business and buyer
Real-time analytics and dashboards are critical in today’s commerce landscape. A good order management system offers actionable insights into order volume, inventory turnover, fulfillment speed, and customer behavior. Buyers benefit from instant updates on order status, while businesses can make data-driven decisions for improvement.
6. Distributed Order Management (DOM)
Distributed Order Management (DOM) refers to the capability of the OMS to process and fulfill orders using multiple inventory sources like warehouses, stores, or third-party logistics. It ensures that orders are assigned to the best fulfillment center based on proximity, availability, and cost. DOM helps in maximizing speed and minimizing shipping expenses.
7. Helps route orders optimally
An advanced order management solution can automatically route orders to the most appropriate fulfillment center. This smart routing reduces delivery time, optimizes shipping costs, and balances stock levels across locations. It ensures timely deliveries and prevents overselling or stockouts.
What Are the Features of Order Management System?
An effective Order Management System (OMS) offers a wide range of features that support the entire order lifecycle—from order capture to fulfillment and returns. These features help businesses improve accuracy, enhance customer satisfaction, and scale efficiently.
- Visibility: Gain end-to-end visibility into order statuses, inventory levels, and delivery timelines across all sales channels.
- Intelligence: Leverage data-driven insights and automation to improve decision-making and operational efficiency.
- Flexibility: Easily adapt to changing order volumes, sales channels, and customer needs without disrupting workflows.
- Real-time Inventory: Monitor stock levels in real time to prevent overselling, manage reorders, and optimize inventory allocation.
- Delivery and Service Scheduling: Schedule deliveries and services based on availability, location, and priority to enhance on-time performance.
- Customer Engagement Technologies: Use integrated communication tools to keep customers informed with order updates and support options.
- Fulfillment Optimization: Automatically assign orders to the most efficient fulfillment center or shipping method to reduce costs and time.
- Automated Sales Processes: Automate repetitive tasks like order entry, invoicing, and customer notifications to boost productivity.
- Inventory Control: Maintain accurate inventory records, track movement, and set thresholds for low-stock alerts.
- Customer Relationship Management: Manage customer data, order history, and preferences to personalize service and improve loyalty.
- Sales Automation: Streamline the sales cycle with tools for lead tracking, quotes, and order conversions.
- Shipping and Receiving: Manage shipping carriers, track packages, and automate receiving processes to streamline logistics.
- Payment Collection: Integrate multiple payment gateways to collect and reconcile payments quickly and securely.
- Document Tracking: Digitally manage invoices, packing slips, and other critical order-related documents for easy access.
- Advanced Reporting: Generate custom reports and analytics on order trends, fulfillment rates, and customer behavior.
- Mobile Apps: Access OMS functions on-the-go with mobile apps for managing orders, inventory, and customers remotely.
Order Management Process Stages
The order management process involves a sequence of steps that ensure a customer’s order is efficiently received, processed, and completed. A streamlined process reduces errors, enhances customer satisfaction, and ensures timely fulfillment.
1. Receiving the order
This is the first step where the order is captured from a sales channel—whether it’s an eCommerce platform, mobile app, or in-store POS. The system records customer details, product selection, pricing, and payment information to initiate processing.
2. Processing/Fulfilling the order
At this stage, the order is verified, inventory is allocated, and fulfillment operations begin. The warehouse team picks, packs, and ships the product, while the system updates the order status and sends tracking details to the customer.
3. Post-sales processes
After the product is delivered, post-sales activities like returns, exchanges, refunds, and customer support come into play. These steps are crucial for maintaining customer trust and loyalty, and are typically managed within the order management software for transparency and efficiency.
Key Aspects and Benefits of Order Management System
A well-implemented Order Management System (OMS) provides both operational and strategic advantages. From improving customer satisfaction to optimizing backend processes, the benefits impact nearly every part of a business.
- Customer satisfaction and loyalty: Delivering accurate, on-time orders improves customer experience and encourages repeat business.
- Increased efficiency, reduced errors: Automation reduces manual entry and mistakes, speeding up the entire order cycle.
- Better inventory management (including production control/tracking): Track inventory and production in real time to prevent stockouts, overstocking, and delays.
- Enhanced visibility into order status and inventory: Teams and customers can track orders and inventory levels at every step of the journey.
- Streamlined order fulfillment: Orders are routed, packed, and shipped more quickly and accurately, reducing fulfillment time.
- Better data analysis and reporting: Access to detailed reports helps identify trends, forecast demand, and optimize operations.
- Stronger vendor relationships: Real-time data sharing improves coordination with suppliers and third-party logistics.
- Improved financial management: Track costs, revenue, and profit margins accurately with integrated payment and invoicing tools.
- Scalability and growth support: A flexible system grows with your business, handling increased order volume and new sales channels.
- Accurate product availability: Real-time inventory sync ensures product listings reflect true availability, avoiding overselling.
- Easy access to order status and return options: Customers can check order updates and initiate returns or exchanges seamlessly.
- Supply chain visibility: Monitor every touchpoint in the supply chain for better planning and risk mitigation.
Order Management Metrics
Tracking the right order management metrics helps businesses measure efficiency, optimize performance, and enhance customer satisfaction throughout the order lifecycle.
- Average Order Value (AOV): Measures the average amount a customer spends per order.
Formula: Total revenue ÷ Number of orders - Cost per Order: Calculates the total cost involved in processing a single order.
Formula: Total operational costs ÷ Number of orders - Internal Order Cycle Time (Lead Time): Measures the time taken from order receipt to shipment.
Formula: Order shipment date – Order received date - On-time Shipping Rate: Shows the percentage of orders shipped on or before the promised time.
Formula: (Number of orders shipped on time ÷ Total orders shipped) × 100 - Order Fill Rate: Indicates the percentage of customer orders fulfilled from available stock without delay.
Formula: (Orders filled completely ÷ Total orders) × 100 - Order Fulfillment Cycle Time: Reflects how long it takes to fulfill an order from start to finish.
Formula: Order delivery date – Order placement date - Orders Picked per Hour: Evaluates warehouse productivity by tracking how many orders are picked per hour.
Formula: Total orders picked ÷ Total labor hours - Order Placement Percentage: Measures the proportion of visitors who complete a purchase.
Formula: (Number of orders placed ÷ Number of website visitors) × 100 - Perfect Order Rate: Tracks the percentage of orders delivered without any issues (delays, damage, or errors).
Formula: (Number of perfect orders ÷ Total orders) × 100 - Purchasing Frequency of Customers: Measures how often a customer makes a purchase within a set time period.
Formula: Total number of purchases ÷ Number of unique customers - Rate of Returns: Shows the percentage of orders that are returned by customers.
Formula: (Number of returned orders ÷ Total orders shipped) × 100 - Scrap Rate: Identifies the percentage of goods that are discarded due to damage or defects.
Formula: (Scrap quantity ÷ Total produced quantity) × 100 - Shipping Cost per Order: Calculates the average cost of shipping per order.
Formula: Total shipping costs ÷ Total number of orders - Shopping Cart Abandonment Rate: Indicates the percentage of customers who add items to their cart but do not complete the purchase.
Formula: (Number of abandoned carts ÷ Number of shopping carts created) × 100
What Are the Qualities of Effective Order Management?
A successful order management strategy goes beyond just processing transactions. It incorporates intelligence, agility, and customer-centricity to ensure orders are handled efficiently from start to finish. Here are the core qualities that define effective order management systems:
1. Agility
An agile order management system quickly adapts to fluctuations in demand, supply chain disruptions, or changes in customer preferences. It enables businesses to pivot operations, reroute orders, or shift inventory in response to real-time events, ensuring continuity and flexibility.
2. Delivery Optimization
Effective systems prioritize fast and cost-efficient deliveries. By leveraging data and automation, businesses can assign orders to the nearest warehouse or shipping partner, minimizing delays and reducing last-mile delivery expenses.
3. Customer Engagement
Customer satisfaction is deeply tied to how well their order experience is managed. An effective order management system includes tools for real-time updates, proactive communication, and easy returns, fostering stronger customer trust and loyalty.
4. Order Management Intelligence
Data-driven order management software leverages predictive analytics and reporting to optimize operations. It helps forecast demand, identify performance gaps, and make informed decisions that enhance overall efficiency.
5. Order Fulfillment Optimization
Speed and accuracy in fulfillment are key to customer satisfaction. Intelligent systems automate order routing, picking, packing, and shipping—ensuring timely, error-free deliveries that match buyer expectations.
6. Real-time Inventory Management
Knowing exactly what’s in stock—and where—is critical. Real-time inventory tracking across warehouses and sales channels prevents overselling, reduces stockouts, and supports smooth order fulfillment.
Challenges in Order Management
Despite the availability of advanced order management system software, businesses still face hurdles that can disrupt operations and impact customer satisfaction. Recognizing and addressing these challenges is crucial for long-term success.
1. Managing Excess Inventory
Holding too much stock ties up capital, increases storage costs, and raises the risk of obsolescence. Businesses must balance supply with demand, using accurate forecasting and inventory control tools to avoid overstocking.
2. Minimizing Inventory Visibility
Lack of real-time insight into stock levels across multiple channels can lead to missed sales, order delays, or fulfillment errors. Limited visibility creates inefficiencies and erodes customer trust when products are unavailable or inaccurately listed.
3. Minimizing Excess Costs
Operational inefficiencies, manual errors, and disjointed systems contribute to rising costs in order processing, fulfillment, and returns. Without streamlined software for order management systems, businesses struggle to reduce these avoidable expenses.
Key Omnichannel Considerations
order management systems must support seamless operations across all touchpoints. Omnichannel strategies ensure customers have a consistent experience whether they buy online, in-store, or via mobile.
1. Multiple Sales Channels
An effective order management software supports sales from various channels—eCommerce sites, marketplaces, physical stores, and mobile apps. It centralizes order data from all sources, helping businesses manage diverse revenue streams without operational silos.
2. Unified View of Inventory
A single source of truth for inventory across locations is critical. With a unified inventory view, businesses can prevent overselling, route orders efficiently, and provide accurate product availability regardless of the sales channel.
3. Flexible Fulfillment Options (BOPIS, BORIS, Ship-from-Store)
Modern buyers expect fulfillment flexibility. With options like Buy Online, Pick Up In-Store (BOPIS), Buy Online, Return In-Store (BORIS), and ship-from-store, businesses can enhance convenience and reduce shipping costs while leveraging their physical footprint.
Types of B2B Order Fulfillment
B2B fulfillment involves more complexity and customization than B2C. The right order management system supports various fulfillment models to meet customer expectations and operational efficiency goals.
1. Just-in-Time (JIT) Delivery
JIT delivery ensures that products are delivered precisely when needed, minimizing inventory holding costs. This method requires precise forecasting and tight coordination with suppliers to avoid stockouts.
2. Vendor-Managed Inventory (VMI)
In VMI, suppliers take responsibility for maintaining inventory levels at the customer’s location. This improves replenishment efficiency and strengthens supplier-customer collaboration.
3. Cross-Docking
Cross-docking involves transferring products directly from inbound to outbound shipping without storing them in a warehouse. It reduces storage costs and shortens delivery times, ideal for high-volume, fast-moving goods.
4. Kitting and Assembly
This process combines multiple products into a single package before shipment. Kitting and assembly add value by reducing post-sale setup time and enhancing the customer experience with ready-to-use bundles.
5. Drop Shipping
With drop shipping, products are shipped directly from the supplier to the end customer without being stored by the seller. This reduces inventory risk and allows businesses to offer a wider product selection.
6. Customization and Personalization
Many B2B clients require custom labeling, packaging, or product adjustments. A flexible fulfillment system supports customization and personalization, enhancing client satisfaction and long-term loyalty.
Conclusion
By adopting a powerful order management system, businesses can enhance visibility, streamline fulfillment, reduce errors, and meet evolving customer expectations. Whether you’re handling B2B orders, managing multi-channel sales, or scaling operations, the right tools and strategies will ensure efficiency and growth.
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